The Big Picture on Publishing, and a Primer on the Emerging Format War
Alternate Title: Before you destroy a thing you should know just what it is you mean to destroy.
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A lot of forecasts & assertions & spin & PR & words have been dropped all around this new thing, e-books, but to me it all smacks of pipe dreams and snake oil.
I’m a numbers guy, just give me the numbers.
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…and it’s a whole lotta numbers: 60 months of data from Publishers.org, the website of the Association of American Publishers. — I’d list a link to each month of data but thankfully there’s already an index at the AAP site
Of course, it took a while to pull everything together into a spreadsheet, but hey, somebody had to do it.
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So, let’s set a baseline first. Total book sales, by month, for the last 60 months. [July 2005 to June 2010.] For this calculation I’ve included college text-books but excluded the el-hi (elementary to high school) text book market.
Here it is kids: this is bookselling.
- bookselling is seasonal. Everyone knows this, I guess, as all retail is seasonal. Some books are bought as gifts, in fact, though I think a lot of the December bump is folks buying gifts for themselves after mall trawls and selective skirmishes into discount retailers: a hot cup of cocoa and a little something to curl up with on a cold winter night. (maybe that’s just me)
- textbooks are bookselling – and a big ol’ chunk of bookselling at that. Some observers (myself included) raised an eybrow at the B&N/B&N College merger – but just look at that graph: every August & September is like Christmas all over again, except for two months, and while not nearly as many units are sold, the ones that do sell are selling at text book prices. The college business is that big (just look at the graph) and maybe buying B&N College for a half billion was cheap at the price.
- even at it’s worst — Feb, Mar, Apr each year — books sell in the hundreds of millions monthly. And sales of close to 1.5 billion each December doesn’t hurt either.
Obviously textbooks are a destabilising factor; let’s run the same chart without them:
Here we see something much more interesting. Returns of textbooks to publishers each March and October actual drag down total sales. That, and the peak for books isn’t December (that’s just kids gearing up for second semester) — the real season for book sales is Autumn, peaking each Sept-Oct, months before holiday retail.
Bet you didn’t count on that! Heck, I work retail (& I’m a bookseller) and we do gobs of business each December but it never occured to me (until I made that chart) how much of that isn’t books: calendars, greeting cards, gift wrap, board games; everything and anything but the books (though we sell books, too.)
I haven’t even hit my main points yet and I’m already learning something. Research is it’s own reward.
If you hadn’t already guessed, I’ll be slowly adding more and more lines to this graph just to illustrate what the book business is and where it’s going — slowly, to give your brain time to assimilate the info. Next line is e-books, and given where e-books currently stand, it’d be easy to use this as a punchline:
Even with double- and triple-digit growth year-to-year, ebooks are, well, just a footnote. So Far. I’ll get back to e- before the end of this post, and we’ll adjust the scale so we can more clearly see just how the e biz is doing for books. But given the scope of the rest of publishing, even without the text book market? just a blip.
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Amazon recently reported that they sell more Kindle books than hardcovers. Woot. Yay. I find it interesting, however, that this news only comes out after the spring (which as we can see in graphs above is a seasonal low-point in book sales) and only compared to hardcover books sales… well, since I have those numbers, let’s analyze it. I’ll even give Amazon the benefit of the doubt, and combine adult and childrens hardcover into a single number
Amazon has at least 80% of the ebook business but only 13% of overall book sales [per my most recent analysis] so growth in the former combined with a seasonal- and recession-related drop in the latter makes for a good headline.
But what does it actually look like?
The “explosion” in Kindle sales didn’t seem to affect hardcover much. Indeed, Amazon sells a lot of books (2 billion dollars worth in 2009, by my count) but that still isn’t enough to move the needle: Publishing and bookselling seem to be doing fine, and doing their own thing, even after 15 years of Amazon (and 5 years as charted in detail above)
I think you can see the overall trends, so let me add the last two threads:
The “Trade” paperbacks [the purple line in the graph above] don’t follow the same trends as hardcover, and the “mass market” paperbacks [teal] seem immune, even to seasonal trends. Even at this scale, I think we can see e-books eating more into mass-market paperbacks (the closest format to e-books in price) than any other publishing trend.
Of course, we’re in a recession, so it’s hard to say just what’s going on, or what will happen.
Let me adjust the scale, so we can see better:
With a bit of focus, we can see e-book sales steadily growing throughout 2009, with a definite spike after the 2009 holiday season: ebook sales suddenly doubled, and seem to have reached a new plateau just shy of $30 Million monthly. Great for e-books.
Ah, yes, but what changed from January of 2009 to January of 2010? Was it something that Amazon did, or was it the entry of Barnes & Noble into the e-book market, and the introduction of Apple’s iPad?
I invite you to draw your own conclusions, but I’d put forward that no matter what Amazon’s strength in the e-book market, they are still just a marginal retail player, and folks hadn’t even heard about e-books until Steve Jobs did an iPad demonstration and all of a sudden it was on every local-tv-broadcast-news telecast (you know, 1950s technology) coast to coast.
Amazon certainly benefits from the buzz currently surrounding e-books, but they didn’t generate it.
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In my last post I tried to figure out just what share Amazon had of the book business; I estimated they currently hold $2 billion (plus or minus $200 million) — that’s about 15% of the trade book business [somewhere between 12 and 18% – you can quote 20% if you really feel like but it it’s much likely to be less] but less than 10% of the total book business when textbooks are included.
If we hold to the best guess, $2 billion (& 15% of trade) then a safer estimate of Amazon’s actual total book share is 8%
That’s… actually pretty darn good. One of the throwaway statistics I generated in that last post is that Game Stop, acknowledged market leader in it’s segment, only sells 7% of all new games (of course, they make gobs of cash off of systems and a billion plus annually on used games, but that wasn’t the calculation I ran).
For comparison: for the fiscal year ending May 1, 2010 [pdf] Barnes & Noble reported retail sales (Stores + BN.com) of $4.974 billion, with an added kicker of $800 million in sales through their college stores.
B&N sells more than books. There are CDs, DVDs, magazines, board games, stationary, gifts, greeting cards… but if all of that adds up to more than a billion dollars I’d be surprised. Even if 40% of B&N’s business were non-book, they’d still be selling close to 3 billion dollars worth of books each year.
Just like I had to make a guess at Amazon’s share of the book business ($2 billion out of $5.964 billion in “media” sales) I’ll take a stab at B&N: I’m going to say $4 billion of that $4.974 billion of “retail” is books and I’m going to leave their college segment out of it.
In fact my best guess is 3.5-3.75 billion dollars, but once again, that’s without the text books: $4 billion is a nice round number and is as “accurate” as my Amazon estimate.
If you like my math and (informed) assumptions, then you might be excused for thinking B&N handles 25% of the trade book business and 16-17% of all book retail. This seems to match other estimates which should make me a smug bastard but all the guess work and really big numbers and potential errors of, I don’t know, a billion dollars either way make me less confident.
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Let’s go back to e-books. Here’s the e-book numbers on their own, without the massive rest of the industry pressing down on top of it:
Here the growth trend is much more pronounced.
Growth is the key word. Yes, the book business is huge, billions, but it’s also largely static. I posted charts showing five years of sales and there’s a nice, repeating seasonal pattern. Reliable. While no one knows which books are going to sell, the industry as a whole is going to sell some books.
But none of the other book categories is growing.
I need at least another 6 months of data to see where e-book sales are trending; my guess is it’ll hover around $30 million a month for the rest of the year, and then after Holidays 2010 (and a whole new batch of e-readers given as gifts) we’ll see e-books climb to the next plateau. E-books will do $360 million this year, fairly easy. Will it be $500 million in 2011? Will e-books continue to cannibalize sales of mass-market paperbacks? Will it affect other paperbacks and hardcovers as well?
Is the growth of e-books also growth for books? Or are we just shifting beans around to different columns without changing the book & publishing total?
In a separate post, I’ll go into my opinions on why e-books are hitting the mass market paperbacks first.
